Aave DAO voted to let Bitcoin holders lock native BTC in Babylon's self-custodial vaults and borrow USDT, USDC and other assets on Aave V4 once it goes live.
Key Facts
Aave DAO voted unanimously on Nov. 9 to enable native Bitcoin as collateral on Aave V4 through Babylon's Trustless Bitcoin Vaults, Babylon said.
Bitcoin holders will be able to lock BTC in self-custodial vaults and borrow USDT, USDC and other supported assets once it is activated, with a 78% collateral factor and no wrapping, Babylon said.
Aave DAO will share revenue from the integration with Babylon and fund AAVE and BABY buybacks, and a final AIP stage is still needed to activate it on Ethereum mainnet.
Aave (AAVE) DAO voted unanimously to let Bitcoin holders use native BTC as collateral on Aave V4 through Babylon's Trustless Bitcoin Vaults, Babylon said.
The proposal passed on Nov. 9 with 100% of votes in favor. Bitcoin holders will be able to lock their coins in self-custodial vaults and borrow USDT, USDC and other supported assets, without wrapping, bridging or a tri-party agreement, Babylon said.
"Strong start by enabling real Bitcoin as collateral on Aave," Aave founder Stani Kulechov wrote during the proposal's Temp Check, according to Babylon's blog post.
AAVE, whose buybacks are set to get a share of the integration's revenue, has slipped over the past week. Source: CoinMarketCap
How It Will Work
Bitcoin (BTC) holders will borrow through a new Babylon Spoke on Aave V4, while a BTCVault Swap Spoke settles liquidations, Babylon said. Native Bitcoin will get a 78% collateral factor and a 0% risk premium, which Babylon said means no extra borrowing interest.
Liquidity will come mainly from Aave's Core Hub, which starts with $21 million in credit lines across USDT, USDC, GHO, USDG, RLUSD and WBTC, and will increase progressively, Babylon said. Babylon said holders keep title to their Bitcoin, which stays in self-custody.
The next step is a final Aave Improvement Proposal to activate the integration on Ethereum mainnet.
Revenue Share and Buybacks
Aave DAO will keep the first $500,000 of the integration's revenue in each 12-month period after launch and share revenue above that with Babylon, Babylon said. The tiered split starts at 78% for Aave, 18% for Babylon and 4% for a buyback fund on annual revenue between $500,000 and $2 million, and ends at 61.5%, 31.5% and 7% above $6 million.
The buyback fund will go 85% to AAVE buybacks and 15% to Babylon (BABY) buybacks. Babylon said six security firms ran multiple rounds of audits on the integration, and four teams from Aave DAO also reviewed it.
The vote follows Kraken parent Payward's purchase of an AAVE stake with clients and Aave Labs' acquisition of the Avon team to build fixed-rate lending.
AAVE traded at $123.18, down 0.4% over 24 hours and 5.6% over seven days, according to CoinMarketCap data.
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